To provide for the transition to competition among electric energy suppliers for the benefit and protection of consumers, and for other purposes.

IN THE SENATE OF THE UNITED STATES

November 7, 1997

Mr. BUMPERS (for himself and Mr. GORTON) introduced the following bill; which was read twice and referred to the Committee on Energy and Natural Resources

A BILL

To provide for the transition to competition among electric energy suppliers for the benefit and protection of consumers, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the ‘Transition to Electric Competition Act of 1997’.

(b) TABLE OF CONTENTS- The table of contents is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Findings.

Sec. 3. Definitions.

Sec. 4. Severability.

Sec. 5. Enforcement.

TITLE I--RETAIL COMPETITION

Sec. 101. Mandatory retail access.

Sec. 102. Aggregation.

Sec. 103. Prior implementation.

Sec. 104. State regulation.

Sec. 105. Retail stranded cost recovery.

Sec. 106. Wholesale stranded cost recovery.

Sec. 107. Lost retail benefits.

Sec. 108. Universal service.

Sec. 109. Public benefits.

Sec. 110. Renewable energy.

Sec. 111. Determination of local distribution facilities.

Sec. 112. Transmission.

Sec. 113. Competitive generation markets.

Sec. 114. Nuclear decommissioning costs.

Sec. 115. Right to know.

Sec. 116. Exemption of Alaska and Hawaii.

TITLE II--PUBLIC UTILITY HOLDING COMPANIES

Sec. 201. Repeal of the Public Utility Holding Company Act of 1935.

Sec. 202. Exemptions.

Sec. 203. Federal access to books and records.

Sec. 204. States access to books and records.

Sec. 205. Affiliate transactions.

Sec. 206. Clarification of regulatory authority.

Sec. 207. Effect on other regulation.

Sec. 208. Enforcement.

Sec. 209. Savings provision.

Sec. 210. Implementation.

Sec. 211. Resources.

TITLE III--PUBLIC UTILITY REGULATORY POLICIES ACT

Sec. 301. Definition.

Sec. 302. Facilities.

Sec. 303. Contracts.

Sec. 304. Savings clause.

Sec. 305. Effective date.

TITLE IV--ENVIRONMENTAL PROTECTION

Sec. 401. Study.

TITLE V--BONNEVILLE POWER ADMINISTRATION

Sec. 501. Findings and purposes.

Sec. 502. Columbia River fish and wildlife coordination and governance.

Sec. 503. Pacific Northwest federal transmission access.

Sec. 504. Transition cost mechanism.

Sec. 505. Independent system operator participation.

Sec. 506. Financial obligations.

Sec. 507. Prohibition on retail sales.

Sec. 508. Clarification of Commission authority.

Sec. 509. Repealed statute.

TITLE VI--TENNESSEE VALLEY AUTHORITY

Sec. 601. Competition in service territory.

Sec. 602. Ability to sell electric energy.

Sec. 603. Termination of contracts.

Sec. 604. Rates for electric energy.

Sec. 605. Privatization study.

SEC. 2. FINDINGS.

The Congress finds that:

(a) Congress has the authority to enact laws, under the Commerce Clause of the United States Constitution, regarding the wholesale and retail generation, transmission, distribution, and sale of electric energy in interstate commerce.

(b) Several States have taken steps to require competition among retail electric suppliers and a large number of other States are expected to act.

(c) It has been the policy of Congress and the Commission to promote competition among wholesale electric suppliers.

(d) It is in the public interest that the transition towards competition in electric service ensures that all consumers receive reliable and competitively-priced electric service.

(e) Electric utility companies that prudently incurred costs pursuant to a regulatory structure that required them to provide electricity to consumers should not be penalized during the transition to competition.

(f) Consumers will not benefit from the introduction of competition among electric energy suppliers if certain suppliers have undue market power.

(g) It is important to encourage conservation and the use of renewable resources to reduce reliance on fossil fuels, promote domestic energy security and protect the environment.

SEC. 3. DEFINITIONS.

For purposes of this Act:

(a) The term ‘affiliate’ of a specific company means any company 5 percent or more of whose outstanding voting securities are owned, controlled, or held with power to vote, directly or indirectly, by such specific company.

(b) The term ‘aggregator’ means any person that purchases or acquires retail electric energy on behalf of two or more consumers.

(c) The term ‘ancillary services’ shall have the same meaning assigned to it by the Commission.

(d) The term ‘associate company’ of a company means any company in the same holding company system with such company.

(e) The term ‘Commission’ means the Federal Energy Regulatory Commission.

(f) The term ‘company’ means a corporation, joint stock company, partnership, association, business trust, organized group of persons, whether incorporated or not, or a receiver or receivers, trustee or trustees of any of the foregoing.

(g) The term ‘corporation’ means any corporation, joint-stock company, partnership, association, rural electric cooperative, municipal utility, business trust, organized group of persons, whether incorporated or not, or a receiver or receivers, trustee or trustees of any of the foregoing.

(h) The term ‘electric utility company’ means any company that owns or operates facilities used for the generation, transmission or distribution of electric energy for sale.

(i) The term ‘gas utility company’ means any company that owns or operates facilities used for distribution at retail (other than the distribution only in enclosed portable containers) of natural or manufactured gas for heat, light or power.

(j) The term ‘holding company system’ means a holding company together with its subsidiary companies.

(k) The term ‘large hydroelectric facility’ means a facility which has a power production capacity which, together with any other facilities located at the same site, is greater than 80 megawatts.

(m) The term ‘lost retail benefits’ means the increased cost of retail electric energy in a retail electric energy provider’s service territory resulting from the sale subsequent to the implementation of retail electric competition, outside such service territory, of electric energy generated at facilities the cost of which were included in the retail rate base of the retail electric energy provider prior to the implementation of retail electric competition.

(n) The term ‘mitigation’ means any widely accepted business practice used by an electric utility company to dispose of or reduce uneconomic assets or costs.

(o) The term ‘municipal utility’ means a city, county, irrigation district, drainage district, or other political subdivision or agency of a State competent under the laws thereof to carry on the business of a retail electric energy provider and/or a retail electric energy supplier.

(p) The term ‘person’ means an individual or corporation.

(q) The term ‘public utility company’ means an electric utility company or gas utility company but does not mean a qualifying facility as defined in the Public Utility Regulatory Policies Act, or an exempt wholesale generator or a foreign utility company defined in the Energy Policy Act of 1992.

(r) The term ‘public utility holding company’ means (A) any company that directly or indirectly owns, controls, or holds with power to vote, 10 percent or more of the outstanding voting securities of a public utility company or of a holding company of any public utility company; and (B) any person, determined by the Securities and Exchange Commission, after notice and opportunity for hearing, to exercise directly or indirectly (either alone or pursuant to an arrangement or understanding with one or more persons) such a controlling influence over the management or policies of any public utility or holding company as to make it necessary or appropriate for the protection of consumers with respect to rates that such person be subject to the obligations, duties, and liabilities imposed in this title upon holding companies.

(t) The term ‘Renewable Energy Credit’ means a tradable certificate of proof that one unit (as determined by the Commission) of renewable energy was generated by any person.

(u) The term ‘retail electric competition’ means the ability of each consumer in a particular State to purchase retail electric energy from any person seeking to sell electric energy to such consumer.

(v) The term ‘retail electric energy’ means electric energy and ancillary services sold for ultimate consumption.

(w) The term ‘retail electric energy provider’ means any person who distributes retail electric energy to consumers regardless of whether the consumers purchase such energy from the provider or an alternative supplier. A retail electric energy provider may also be a retail electric energy supplier.

(y) The term ‘retail stranded costs’ means all legitimate, prudent, verifiable and non-mitigatable costs incurred by an electric utility company in all of its generation assets which would have been recoverable in retail rates but for the implementation of retail electric competition, less the total market value of these assets after retail electric competition is implemented. Binding power purchase contracts and regulatory assets, the costs of which would have been recovered but for the implementation of retail electric competition, shall be considered generation assets for purposes of this subsection.

(z) The term ‘rural electric cooperative’ means a corporation that is currently paying off a loan for the purposes of providing electric service from the Administrator of the Rural Electrification Administration or the Rural Utilities Service under the Rural Electrification Act of 1936.

(aa) The term ‘State’ means any State or the District of Columbia.

(bb) The term ‘State regulatory authority’ means the regulatory body of a State or municipality having sole jurisdiction to regulate rates and charges for the distribution of electric energy to consumers within the State or municipality.

(cc) The term ‘subsidiary company’ of a holding company means--

(1) any company 10 percent or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by such holding company; and

(2) any person the management or policies of which the Securities and Exchange Commission, after notice and opportunity for hearing, determines to be subject to a controlling influence, directly or indirectly, by such holding company (either alone or pursuant to an arrangement or understanding with one or more other persons) so as to make it necessary for the protection of consumers that such person be subject to the obligations, duties, and liabilities imposed upon subsidiary companies of public utility holding companies.

(dd) The term ‘transmission system’ means all facilities, including federally-owned facilities, transmitting electricity in interstate commerce in a particular region, including all facilities transmitting electricity in the State of Texas and those providing international interconnections, but does not include local distribution facilities as determined by the Commission.

(ee) The term ‘wholesale electric energy’ means electric energy and ancillary services sold for resale.

(gg) The term ‘wholesale stranded costs’ shall have the same meaning as in the Commission’s Order No. 888.

(hh) The term ‘voting security’ means any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a company.

SEC. 4. SEVERABILITY.

If any provision of this Act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of the Act, and the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

SEC. 5. ENFORCEMENT.

(a) VIOLATION OF THE ACT- If any individual or corporation or any other retail electric energy supplier or provider fails to comply with the requirements of this Act, any aggrieved person may bring an action against such entity to enforce the requirements of this Act in the appropriate Federal district court.

(b) STATE OR COMMISSION ACTION- Notwithstanding any other provision of law, any person seeking redress from an action taken by a State regulatory authority, the Commission or a regulatory board pursuant to this Act shall bring such action in the appropriate circuit of the United States Court of Appeals.

TITLE I--ELECTRIC COMPETITION

SEC. 101. MANDATORY RETAIL ACCESS.

(a) CUSTOMER CHOICE- Beginning on January 1, 2002, each consumer shall have the right to purchase retail electric energy from any person offering to sell retail electric energy to such consumer, subject to any limitations imposed pursuant to section 104(a) of this Act.

(b) LOCAL DISTRIBUTION AND RETAIL TRANSMISSION FACILITIES- Beginning on January 1, 2002, all persons seeking to sell retail electric energy shall have reasonable and nondiscriminatory access, on an unbundled basis, to the local distribution and retail transmission facilities of all retail electric energy providers and all ancillary services.

SEC. 102. AGGREGATION.

Subject to any limitations imposed pursuant to section 104(a) of this Act, a group of consumers or any person acting on behalf of such group may purchase or acquire retail electric energy for the members of the group if they are located in a State or States where there is retail electric competition.

SEC. 103. PRIOR IMPLEMENTATION.

(a) STATE ACTION- Nothing in the Federal Power Act (16 U.S.C. 824 et seq.) shall be deemed to prohibit a State or State regulatory authority, if authorized under State law, from requiring retail electric energy providers selling retail electric energy to consumers in such State to provide reasonable and nondiscriminatory access, on an unbundled basis, to its local distribution facilities and all ancillary services to any retail electric energy supplier prior to January 1, 2002.

(b) GRANDFATHER- Legislation enacted by a State or a regulation issued by a State regulatory authority which has the effect of providing all consumers in such State the opportunity to purchase retail electric energy from any retail electric energy supplier by January 1, 2002 and provides electric utility companies with the opportunity to recover their retail stranded costs as defined by this Act (unless there is an agreement

between a State or State regulatory authority and a retail electric energy provider which provides for a different level of recovery), shall be deemed to be in compliance with the requirements of sections 101 and 105 of this Act.

(c) RECIPROCITY- A State or State regulatory authority that provides for retail electric competition may preclude any retail electric energy provider selling retail electric energy to consumers in another State and their affiliates from selling retail electric energy to consumers in the State with retail electric competition if the retail electric energy providers does not provide reasonable and nondiscriminatory access, on an unbundled basis, to its local distribution facilities to any retail electric energy supplier.

SEC. 104. STATE REGULATION.

(a) STATE REQUIREMENTS- A State or a State regulatory authority may impose requirements on persons seeking to sell retail electric energy to consumers in that State which are intended to promote the public interest, including requirements related to generation reliability and the provision of information to consumers and other retail electric energy suppliers. Any such requirements must be applied on a nondiscriminatory basis and may not be used to exclude any class of potential suppliers, such as retail electric energy providers, from the opportunity to sell retail electric energy.

(b) MAINTENANCE OF STATE AUTHORITY- Nothing in this Act is intended to prohibit a State from enacting laws or imposing regulations related to retail electric energy service that are consistent with the requirements of this Act.

(c) CONTINUED STATE AUTHORITY OVER DISTRIBUTION- A State or State regulatory authority may continue to regulate local distribution service currently subject to State regulation, including billing and metering in any manner consistent with this Act.

SEC. 105. RETAIL STRANDED COST RECOVERY.

(a) APPLICATION FOR DETERMINATION- Except as provided in subsection (b) an electric utility company subject to the ratemaking jurisdiction of a State regulatory authority prior to date of enactment of this Act may submit an application to the State regulatory authority seeking a determination to its total stranded costs in that State if--

(1) the State regulatory authority has issued a regulation or the State has enacted legislation requiring retail electric competition which does not provide for the full recovery of retail stranded costs; or

(2) the electric utility company’s retail distribution customers have access to retail competition as a result of the requirements of Section 101 of this Act.

(3) If a State regulatory authority fails to determine the electric utility company’s retail stranded costs within 18 months after the date upon which the company applied for a determination of its stranded costs, the Commission shall determine the company’s retail stranded costs.

(b) NONREGULATED UTILITIES- A municipal or rural electric cooperative that seeks to recover its retail stranded costs may determine its total retail stranded costs.

(c) RIGHT OF RECOVERY- (1) An electric utility company, municipal utility or retail electric cooperative shall be entitled to full recovery of its retail stranded costs, as determined pursuant to subsection (a) or (b), over a reasonable period of time through a non-bypassable Stranded Cost Recovery Charge imposed on its customers.

(d) PROHIBITION ON COST-SHIFTING- (1) No class of consumers in a State shall be assessed a Stranded Cost Recovery Charge that

a State regulatory authority or the Commission, whichever is applicable, determines is in excess of the class’ proportional responsibility for the retail electric energy provider’s costs that existed prior to the implementation of retail electric competition in such State.

(2) Customers of a retail electric energy provider that serves consumers in more than one State or that is affiliated with another retail electric energy provider shall only be responsible for stranded costs associated with retail electric competition in the State or area in which such customers are located.

(e) PRIOR PRUDENCE DETERMINATIONS- Nothing in this Act is intended to affect or modify or permit the modification of a final determination made by the Commission or a State regulatory authority or an agreement entered into by the Commission or a State regulatory authority with regard to the prudence of any costs associated with a particular generating facility or contract.

SEC. 106. WHOLESALE STRANDED COST RECOVERY.

(a) COMMISSION REGULATION- The Commission shall have sole jurisdiction to determine and provide for the recovery of wholesale stranded costs associated with wholesale electric competition with regard to public utilities subject to jurisdiction of the Commission pursuant to the Federal Power Act.

(b) REGIONAL GENERATING FACILITIES-

(1) The consent of Congress is given for the creation of a regional board if--

(A) each State regulatory authority regulating an affiliate of a public utility holding company with affiliate retail electric energy providers serving customers in more than one State elects to join such a board;

(B) an affiliate of the public utility holding company owns and/or operates a generating facility and sells power from that facility to two or more affiliates of the same holding company and did not sell retail electric energy prior to January 30, 1997 (hereinafter referred to as the ‘wholesale generating company’); and

(C) the public utility holding company notifies each State regulatory authority which regulates a retail electric energy provider affiliated with the holding company that it intends to seek recovery of the wholesale stranded costs associated with the generating facility or facilities (described in subsection (b)(1)(B)) owned by the wholesale generating company affiliated with such holding company.

(2) The regional board shall be formed if each State regulatory authority elects to create the board within six months after receiving the notification described in subsection (b)(1)(C). If such elections are not made within the requisite time period, the Commission shall assume the responsibilities of the board as described in this section.

(3) The regional board shall have 18 months after the date it is formed to determine, on a unanimous basis, the wholesale stranded costs associated with the generating facility which is the subject of the proceeding and to allocate such costs among the retail electric energy provider affiliates of the public utility holding company on a just and reasonable and nondiscriminatory basis.

(4) If the regional board fails to make either or both determinations, as described in subsection (b)(3) in the requisite time period, the Commission shall make the determination or determinations that have yet to be made.

(5) After its level of wholesale stranded costs is determined pursuant to this subsection, the wholesale generating company affiliate of the holding company shall be entitled to fully recover its stranded costs, over a reasonable period of time, from the retail electric energy provider affiliates to which it sells electric energy pursuant to the procedures established by this subsection.

(6) A retail electric energy provider’s wholesale stranded cost payment obligations pursuant to this subsection shall be deemed retail stranded costs for the purposes of section 105 of this Act.

SEC. 107. LOST RETAIL BENEFITS.

A State may require a retail electric energy provider to compensate its retail customers for lost retail benefits if, after retail competition is implemented, the market value of all of the provider’s generating assets in the rate base prior to the implementation of retail electric competition is greater than the total costs of these assets that would have been recoverable in retail rates but for the implementation of retail electric competition. No retail electric energy provider shall be required to compensate its customers in an amount that exceeds the increased market value of its generating assets resulting from the implementation of retail electric competition.

SEC. 108. UNIVERSAL SERVICE.

(a) STATE UNIVERSAL SERVICE PROGRAMS- A State may establish a Universal Service Program that ensures that all consumers have access to purchase retail electric energy from at least one retail electric energy supplier at a just and reasonable rate.

(b) SERVICE OBLIGATION- (1) After January 1, 2002, each retail electric energy provider located in a State that has not yet established a Universal Service Program described in subsection (a) shall be obligated to sell retail electric energy to, or purchase retail electric energy on behalf of, any of its customers in a particular geographic area in which a State regulatory authority or the Commission, if the State regulatory authority fails to make a determination pursuant to a request by an affected person, determines that there is not effective retail electric competition in such area and the consumer has not affirmatively chosen a retail electric energy supplier.

(2) The retail electric energy provider performing the service described in subsection (b)(1) is entitled to a just and reasonable rate from the consumer receiving such service.

(c) UNIVERSAL SERVICE FUND- A State or a State regulatory authority, if authorized by the State, may impose a non-bypassable Universal Service Charge on all customers of every retail electric energy provider in such State to fund all or part of the costs of a Universal Service Program, including the partial or full payment of the charges a provider may recover pursuant to subsection (b)(2).

SEC. 109. PUBLIC BENEFITS.

Nothing in this Act shall prohibit a State or State regulatory authority from assessing charges on retail consumers of energy to fund public benefits programs such as those designed to aid low-income energy consumers, promote energy research and development or achieve energy efficiency and conservation.

SEC. 110. RENEWABLE ENERGY.

(a) MINIMUM RENEWABLE REQUIREMENT- Beginning on January 1, 2004 and each year thereafter, every retail electric energy supplier shall submit to the Commission Renewable Energy Credits in an amount equal to the required annual percentage of the total retail electric energy sold by such supplier in the preceding calendar year.

(b) STATE RENEWABLE ENERGY PROGRAMS- Nothing in this section shall be construed to prohibit any State or any State regulatory authority from requiring additional renewable energy generation in that State under any program adopted by the State.

(c) REQUIRED ANNUAL PERCENTAGE- Beginning in calendar year 2003, the required annual percentage for each retail electric energy supplier shall be 5 percent. Thereafter, the required annual percentage for each such supplier shall be 9 percent beginning in calendar year 2008 and 12 percent beginning in calendar year 2013.

(d) SUBMISSION OF CREDITS- A retail electric energy supplier may satisfy the requirements of subsection (a) through the submission of--

(1) Renewable Energy Credits issued by the Commission under this section for renewable energy sold by such supplier in such calendar year.

(2) Renewable Energy Credits issued by the Commission under this section to any other retail electric energy supplier for renewable energy sold in such calendar year by such other supplier and acquired by such retail electric energy supplier.

(3) Any combination of the foregoing.

A Renewable Energy Credit that is submitted to the Commission for any year may not be used for any other purpose thereafter.

(e) ISSUANCE OF RENEWABLE ENERGY CREDITS-

(1) The Commission shall establish by rule after notice and opportunity for hearing but not later than one year after the date of enactment of this Act, a National Renewable Energy Trading Program to issue Renewable Energy Credits to retail electric suppliers. Renewable Energy Credits shall be identified by type of generation and the State in which the facility is located. Under such program, the Commission shall issue--

(A) one-half of one Renewable Energy Credit to any retail electric energy supplier who sells one unit of renewable energy generated at a large hydroelectric facility;

(B) one Renewable Energy Credit to any retail electric energy supplier who sells one unit of renewable energy generated at a facility, other than a large hydroelectric facility, built prior to the date of enactment of this Act; and

(C) two Renewable Energy Credits to any retail electric supplier who sells one unit of renewable energy generated at a facility, other than a large hydroelectric facility, built on or after the date of enactment of this Act.

(2) The Commission shall impose and collect a fee on recipients of Renewable Energy Credits in an amount equal to the administrative costs of issuing, recording, monitoring the sale or exchange, and tracking such Credits.

(f) SALE OR EXCHANGE- Renewable Energy Credits may be sold or exchanged by the person issued or the person who acquires the Credit. A Renewable Energy Credit for any year that is not used to satisfy the minimum renewable sales requirement of this section for that year may not be carried forward for use in another year. The Commission shall promulgate regulations to provide for the issuance, recording, monitoring the sale or exchange, and tracking of such Credits. The Commission shall maintain records of all sales and exchanges of Credits. No such sale or exchange shall be valid unless recorded by the Commission.

(g) USE OF PROCEEDS BY BPA- The Administrator of the Bonneville Power Administration shall use the proceeds from the sale of any Renewable Energy Credit issued to the Bonneville Power Administration under this section for its retail electric energy sales to repay the Administration’s outstanding debt to the United States Treasury and bondholders of securities backed by the Bonneville Power Administration.

(h) RULES AND REGULATIONS- The Commission shall promulgate such rules and regulations as may be necessary to carry out this section, including such rules and regulations requiring the submission of such information as may be necessary to verify the annual electric generation and renewable energy generation which is supplied by any person applying for Renewable Energy Credits under this section or to verify and audit the validity of Renewable Energy Credits submitted by any person to the Commission.

(i) ANNUAL REPORTS- The Commission shall gather available data and measure compliance with the requirements of this section and the success of the National Renewable Energy Trading Program established under this section. On an annual basis not later than May 31 of each year, the Commission shall publish a report for the previous year that includes compliance data, National Renewable Energy Trading Program results, and steps taken to improve the Program results.

(j) SUNSET- The requirements of this section shall cease to apply on December 31, 2019.

SEC. 111. DETERMINATION OF LOCAL DISTRIBUTION FACILITIES.

(a) APPLICATION BY STATE REGULATORY AUTHORITY- A State regulatory authority may apply to the Commission for a determination whether a particular facility used for the transportation of electric energy located in such State is a local distribution facility subject to the jurisdiction of that State regulatory authority or is a transmission facility subject to the jurisdiction of the Commission.

(b) COMMISSION FINDINGS- If an application is submitted pursuant to subsection (a) the Commission shall make a determination giving the maximum practicable deference to the position taken by the State regulatory authority, in accordance with the following factors associated with the facility:

(1) function and purpose;

(2) size;

(3) location;

(4) voltage level and other technical characteristics;

(5) historic, current and planned usage patterns;

(6) interconnection and coordination with other facilities; and

(7) any other factor the Commission deems relevant.

SEC. 112. TRANSMISSION.

(a) TRANSMISSION REGIONS- Within two years after the date of enactment of this Act, the Commission shall establish the broadest feasible transmission regions and designate an Independent System Operator to manage and operate the transmission system in each region beginning on January 1, 2002. In establishing transmission regions and designating Independent System Operators the Commission shall give deference to Independent System Operators approved by the Commission prior to the date of enactment of this Act, if it would be consistent with the requirements of this section.

(b) INDEPENDENT SYSTEM OPERATORS- A person designated as an Independent System Operator shall not be subject to the control of--

(1) any person owning any transmission facilities located in the region in which the Independent System Operator will operate; or

(2) any retail electric energy supplier selling retail electric energy to consumers in the region in which the Independent System Operator will operate.

(c) TRANSMISSION REGULATION-

(1) The Commission shall continue to have authority over the transmission of electric energy in interstate commerce by the Independent System Operator within the transmission region designated by the Commission.

(2) The Commission shall have authority over the transmission of electric energy in interstate commerce between two or more transmission regions designated by the Commission.

(3) Sections 212(f) and 212(j) of the Federal Power Act (16 U.S.C. 824k(f)) are repealed effective January 1, 2002.

(4) Section 212(g) of the Federal Power Act (16 U.S.C. 824k(g)) is amended by adding ‘prior to January 1, 2002’ immediately following ‘utilities’.

(5) Section 212(h) of the Federal Power Act (16 U.S.C. 824k(h)--

(A) shall not apply after the date of enactment of this Act where a retail electric energy supplier is seeking access to a transmission facility for the purpose of selling retail electric energy to a consumer located in a State that has authorized retail electric competition prior to January 1, 2002; or

(B) is repealed effective January 1, 2002.

(f) RULES- On or before January 1, 2001, the Commission shall issue binding rules governing oversight of the Independent System Operators and designed to promote transmission reliability and efficiency and competition among retail and wholesale

SEC. 113. COMPETITIVE GENERATION MARKETS.

(1) Section 203(a) of the Federal Power Act (16 U.S.C. 824(a)) is amended by adding ‘including the promotion of competitive wholesale and retail electric generation markets,’ immediately following ‘public interest’.

(2) Section 203 of the Federal Power Act (16 U.S.C. 824b) is further amended by adding at the end the following:

‘(c) ACQUISITION OF NATURAL GAS UTILITY COMPANY- No public utility shall acquire the facilities or securities of a natural gas utility company unless the Commission finds that such acquisition is in the public interest.

‘(d) DEFINITION- For purposes of this section, the term ‘natural gas utility company’ means any company that owns or operates facilities used for the transportation at wholesale, or the distribution at retail (other than the distribution only in enclosed portable containers) of natural or manufactured gas for heat, light, or power.’.

(b) MARKET POWER- The Commission may take such actions as it determines are necessary, including the following:

(1) ordering the physical connection of generating or transmission facilities,

(2) ordering a transmitting utility (as defined in section 3(23) of the Federal Power Act (16 U.S.C. 796(23)) to provide transmission services (including any enlargement of transmission capacity (consistent with applicable state law) necessary to provide such services), or

(3) requiring the divestiture of generating or transmission facilities,

in order to prohibit any retail or wholesale electric energy supplier or retail electric energy provider or any affiliate thereto, from using its ownership or control of resources to maintain a situation inconsistent with effective competition among retail and wholesale electric suppliers.

SEC. 114. NUCLEAR DECOMMISSIONING COSTS.

To ensure safety with regard to the public health and safe decommissioning of nuclear generating units, any retail and wholesale electric energy supplier owning nuclear generating units prior to the date of enactment of this Act shall recover all reasonable costs (as determined by the Commission and relevant State regulatory authorities) associated with Federal and State requirements for the decommissioning of such nuclear generating units pursuant to a non-bypassable charge imposed on all consumers located in the service territories purchasing power, or that had purchased power, from such nuclear generating units. In overseeing the non-bypassable charge, a State regulatory authority may take into account the greater cost responsibility of those consumers which continue to purchase power generated at a nuclear unit.

SEC. 115. RIGHT TO KNOW.

Beginning on January 1, 2002, the Commission shall ensure that each retail electric energy supplier discloses to the public information on the types of fuel used to generate the electricity sold by the supplier, including the percentage of the electric energy sold by the supplier that is generated by each fuel type.

SEC. 116. EXEMPTION OF ALASKA AND HAWAII.

This title shall not apply to any person located in Alaska or Hawaii with regard to any activity or transaction occurring in Alaska or Hawaii.

TITLE II--PUBLIC UTILITY HOLDING COMPANIES

SEC. 201. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935.

The Public Utility Holding Company Act of 1935, as amended, 15 U.S.C. 79 et seq., is hereby repealed, effective one year from the date of enactment of this Act.

SEC. 202. EXEMPTIONS.

(a) FEDERAL AND STATE AGENCIES- No provision of this title shall apply to: (1) the United States, (2) a State or any political subdivision of a State, (3) any foreign governmental

authority not operating in the United States, (4) any agency, authority, or instrumentality of any of the foregoing, or (5) any officer, agent, or employee of any of the foregoing acting as such in the course of his official duty.

(b) UNNECESSARY PROVISIONS- The Commission, by rule or order, may conditionally or unconditionally exempt any person or transaction, or any class or classes of persons or transactions, from any provision or provisions of this title or of any rule or regulation thereunder, if the Commission finds that regulation of such person or transaction is not relevant to the rates of a public utility company. The Commission shall not grant such as exemption, except with regard to section 204 of this Act, unless all affected State regulatory authorities consent.

(c) RETAIL COMPETITION- The provisions of this title shall not apply to a holding company and every associate company of such holding company if the Commission certifies that the retail customers of every public utility subsidiary of such holding company have access to retail electric competition and each State regulatory authority regulating the retail electric energy provider subsidiaries of the holding company certify that they will have sufficient access to the holding company’s books and records relevant to their regulatory responsibilities.

SEC. 203. FEDERAL ACCESS TO BOOKS AND RECORDS.

(a) PROVISION OF BOOKS AND RECORDS- Every holding company and associate company thereof shall maintain, and make available to the Commission, such books, records, accounts, and other documents as the Commission deems relevant to costs incurred by a public utility company that is an associate company of such holding company and necessary or appropriate for the protection of consumers with respect to rates.

(b) EXAMINATION OF BOOKS AND RECORDS- The Commission may examine the books and records of any company in a holding company system, or any affiliate thereof, as the Commission deems relevant to costs incurred by a public utility company within such holding company system and necessary or appropriate for the protection of consumers with respect to rates.

(c) PROTECTED INFORMATION- No member, officer, or employee of the Commission shall divulge any fact or information that may come to his knowledge during the course of examination of books, accounts, or other information as hereinbefore provided, except insofar as he may be directed by the Commission or by a court.

SEC. 204. STATE ACCESS TO BOOKS AND RECORDS.

(a) PROVISION OF BOOKS AND RECORDS- Every holding company and associate company thereof, shall maintain, and make available to each State regulatory authority regulating the rates of any public utility subsidiary of such holding company, such books, records, accounts, and other documents as the State regulatory authority deems relevant to costs incurred by a public utility company that is an associate company of such holding company and necessary or appropriate for the protection of consumers with respect to rates.

(b) PROTECTED INFORMATION- No member, officer, or employee of a State regulatory authority shall divulge any fact or information that may come to his knowledge during the course of examination of books, accounts, or other information as hereinbefore provided, except insofar as he may be directed by the State regulatory authority or a court.

SEC. 205. AFFILIATE TRANSACTIONS.

(a) INTERAFFILIATE TRANSACTIONS- Both the Commission, with regard to wholesale rates, and State regulatory authorities, with regard to retail rates, shall have the authority to determine whether a public utility company may recover in rates any costs of goods and services acquired by such public utility company from an associate company after the date of enactment regardless of when the contract for the acquisition of such goods and services was entered into.

(b) ASSOCIATE COMPANIES- Both the Commission, with regard to wholesale rates, and State regulatory authorities, with regard to retail rates, shall have the authority to determine whether a public utility company may recover in rates any costs associated

with an activity performed by an associate company.

(c) INTERAFFILIATE POWER TRANSACTIONS-

(1) Each State regulatory authority shall have the authority to examine the prudence of a wholesale electric power purchase made by a public utility, which is not an associate company of a public utility holding company, providing retail electric service subject to regulation by the State regulatory authority.

(2) Each State regulatory authority shall have the authority to examine the prudence of a wholesale electric power purchase made by a public utility, which is an associate company of a public utility holding company, providing retail electric service subject to regulation by the State regulatory authority, provided that the costs related to such purchase have not been allocated among two or more associated companies of such public utility holding company, by the Commission prior to the date of enactment and there is no subsequent reallocation after the date of enactment.

SEC. 206. CLARIFICATION OF REGULATORY AUTHORITY.

No public utility which is an associate company of a holding company may recover in rates from wholesale or retail customers any costs (other than wholesale or retail stranded costs) not associated with the provision of electric service to such customers, including those direct and indirect costs related to investments not associated with the provision of electric service to those customers, unless the Commission, with regard to wholesale rates, or a State regulatory authority, with regard to retail rates, explicitly consents.

SEC. 207. EFFECT ON OTHER REGULATION.

Nothing in this Act shall preclude a State regulatory authority from exercising its jurisdiction under otherwise application law to protect utility consumers.

SEC. 208. ENFORCEMENT.

The Commission shall have the same powers as set forth in sections 306 through 317 of the Federal Power Act (16 U.S.C. 825d-825p) to enforce the provisions of this title.

SEC. 209. SAVINGS PROVISION.

Nothing in this title prohibits a person from engaging in activities in which it is legally engaged or authorized to engage on the date of enactment of this title provided that it continues to comply with the terms of any authorization, whether by rule or by order.

SEC. 210. IMPLEMENTATION.

The Commission shall promulgate regulations necessary or appropriate to implement this title not later than six months after the date of enactment of this Act.

SEC. 211. RESOURCES.

All books and records that relate primarily to the function hereby vested in the Commission shall be transferred from the Securities and Exchange Commission to the Commission.

TITLE III--PUBLIC UTILITY REGULATORY POLICIES ACT

SEC. 301. DEFINITION.

For purposes of this title, the term ‘facility’ means a facility for the generation of electric energy or an addition to or expansion of the generating capacity of such a facility.

SEC. 302. FACILITIES.

Section 210 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a-3) shall not apply to any facility which begins commercial operation after the effective date of this title, except a facility for which a power purchase contract entered into under such section was in effect on such effective date.

SEC. 303. CONTRACTS.

After the effective date of this title or after the date on which retail electric competition, as defined in title I of this Act, is implemented in all of its service territories, whichever is earlier, no public utility company shall be required to enter into a new contract or obligation to purchase or sell electric energy pursuant to section 210 of the Public Utility Regulatory Policies Act of 1978.

SEC. 304. SAVINGS CLAUSE.

Notwithstanding sections 302 and 303, nothing in this title shall be construed:

(a) As granting authority to the Commission, a State regulatory authority, electric utility company, or electric consumer, to reopen, force, the renegotiation of, or interfere with the enforcement of power purchase contracts or arrangements in effect on the effective date of this Act between a qualifying small power producer and any electric utility or electric consumer, or any qualifying cogenerator and any electric utility or electric consumer.

(b) To affect the rights and remedies of any party with respect to such a power purchase contract or arrangement, or any requirement in effect on the effective date of this Act to purchase or to sell electric energy from or to a qualifying small power production facility or qualifying cogeneration facility.

SEC. 305. EFFECTIVE DATE.

This title shall take effect on January 1, 2002.

TITLE IV--ENVIRONMENTAL PROTECTION

SEC. 401. STUDY

The Environmental Protection Agency, in consultation with other relevant federal agencies, shall prepare and submit a report to Congress by January 1, 2000, which examines the implications of differences in applicable air pollution emissions standards for wholesale and retail electric generation competition and for public health and the environment. The report shall recommend changes to federal law, if any are necessary, to protect public health and the environment.

(2) The dams provide the Northwest with a continuing source of clean and renewable power but, along with over-fishing and other natural and human impacts on the ecosystem, have adversely affected the Columbia Basin’s fish and wildlife;

(3) Enactment of the Energy Policy Act of 1992 established competition for the wholesale supply of electricity, and market forces have driven the cost of power down nationally, the Northwest included, and has allowed utilities and large users to buy power at rates below those offered by the Bonneville Power Administration;

(4) Realizing the new economic forces impacting electricity, the four Northwest state governors undertook a year-long review in 1996 of the regional electricity system and made recommendations for the future of the system;

(5) Among these recommendations is the separation of the transmission and power marketing functions of the Bonneville Power Administration, with Commission oversight of access to Bonneville’s transmission system, and undertaking this separation in a way that does not impair Bonneville’s ability to meet its obligations to the U.S. Treasury, fish and wildlife programs, and bondholders of the Washington Public Power Supply System;

(6) There are ongoing efforts by Bonneville to reduce its costs and require accountability of its funds, including those of its funds used for salmon recovery; and

(7) There is a need to provide a regional process involving the Federal Government, state governments, tribal governments, utilities and other users of the water of the Columbia and Snake River System, to balance the multiple objectives of the river system.

(b) PURPOSES- The purposes of this title are:

(1) To establish authority in a consolidated regional governing body that will balance the multiple uses of the Columbia and Snake River system, for hydroelectric production, for irrigation, for recreation, for the protection and enhancement of fish and wildlife populations, and for flood control, with that body to be responsible and accountable for spending funds for these purposes;

(2) To facilitate the maintenance of an open transmission system in the Northwest based on Commission rules and to ensure its reliability; and

(3) To assure that the Bonneville Power Administration retains the ability to meet its unique financial obligations to the U.S. Treasury, to fish and wildlife projects, to the bondholders of the Washington Public Power Supply System, and to remain a competitive wholesale supplier of electricity.

SEC. 502. COLUMBIA RIVER FISH AND WILDLIFE COORDINATION AND GOVERNANCE.

This section is reserved.

SEC. 503. PACIFIC NORTHWEST FEDERAL TRANSMISSION ACCESS.

The Commission’s rules on nondiscriminatory open access to transmission services provided by public utilities, including its rules on standards of conduct, shall also apply to transmission services provided by the Bonneville Power Administration, except as otherwise provided by the Commission by rule if it is in the public interest, or except as necessitated by the requirements of section 504 or 506 of this Act. Except as provided in sections 504 and 508 of this Act, rates for transmission imposed by the Administrator shall continue to be established and reviewed and approved in accordance with the provisions of otherwise applicable Federal laws.

SEC. 504. TRANSITION COST MECHANISM.

If the Bonneville Power Administration proposes a charge to recover its transition costs resulting from this Act, the Energy Policy Act, or the Commission’s Order No. 888, a transition cost recovery mechanism shall be developed and adopted by the Commission within 180 days of the filing of the proposal with the Commission.

SEC. 505. INDEPENDENT SYSTEM OPERATOR PARTICIPATION.

Notwithstanding any other provision of law, the Administrator of the Bonneville Power Administration may participate in a regulated Independent System Operator subject to the jurisdiction of the Commission pursuant to section 112 of this Act.

SEC. 506. FINANCIAL OBLIGATIONS.

Section 503, 504 and 505 of this Act shall be interpreted and implemented in a manner that does not adversely affect the security of the Bonneville Power Administration’s Washington Public Power Supply System net-billing and other third-party financing arrangements.

SEC. 507. PROHIBITION ON RETAIL SALES.

Except as provided in section 5(d) of the Northwest Power Act (16 U.S.C. 839c(d)), the Administrator shall not market, sell or dispose of electric power to any end use or retail customers that did not have a contract for the purchase of electric power with the Administrator for services to specific facilities as of October 1, 1997.

SEC. 508. CLARIFICATION OF COMMISSION AUTHORITY.

(2) by striking the period at the end of paragraph (C) and inserting in lieu thereof ‘, and’; and

(3) by adding at the end thereof the following new paragraph:

‘(D) insofar as transmission rates are concerned, the rates do not discriminate between transmission users or classes of users in a manner that has the effect of unreasonably denying transmission access under section 503 of this Act.’

SEC. 509. REPEALED STATUTE.

Section 6 of the Federal Columbia River Transmission System Act (16 U.S.C. 838d) is hereby repealed.

TITLE VI--TENNESSEE VALLEY AUTHORITY

SEC. 601. COMPETITION IN SERVICE TERRITORY.

Notwithstanding any other provision of law, beginning on January 1, 2002, all retail and wholesale electric energy suppliers shall have the right to sell retail and wholesale electric energy to persons that currently purchase retail or wholesale electric energy either directly from the Tennessee Valley Authority or persons purchasing electric energy from the Tennessee Valley Authority.

SEC. 602. ABILITY TO SELL ELECTRIC ENERGY.

(a) TVA- Notwithstanding any other provision of law, the Tennessee Valley Authority may sell wholesale electric energy to any person, subject to any restrictions imposed pursuant to Section 104(a) of this Act, beginning on January 1, 2002.

(b) POWER CUSTOMERS- Notwithstanding any other provision of law, persons that currently purchase wholesale electric energy from the Tennessee Valley Authority may sell wholesale and retail electric energy to any persons subject to any restrictions imposed pursuant to section 104(a) of this Act, beginning on January 1, 2002.

SEC. 603. TERMINATION OF CONTRACTS.

(a) NOTICE.- Beginning on January 1, 2001, the Tennessee Valley Authority shall allow any person that has executed a contract to purchase retail or wholesale electric energy from it to terminate such contract upon one year’s notice.

(b) STRANDED COSTS- Each person holding a contract that is terminated pursuant to subsection (a) shall be responsible for retail or wholesale stranded costs as determined by the Commission.

SEC. 604. RATES FOR ELECTRIC ENERGY.

(a) ESTABLISHMENT- Notwithstanding any other provision of law, the Board of Directors of the Tennessee Valley Authority shall establish, and periodically review and revise, rates for the sale and disposition of wholesale and retail electric energy and for the transmission of electric energy by the Tennessee Valley Authority. Such rates shall be established and, as appropriate, revised to recover, in accordance with sound business principles, the costs associated with the generation, acquisition, conservation, transmission, and distribution of electric energy, including the payment of principal and interest on the Authority’s bonds over a reasonable period.

(b) COMMISSION REVIEW- Rates established under this section shall become effective only upon confirmation and approval by the Commission, upon a finding by the Commission that such rates are sufficient to ensure repayment of the Authority’s bonds over a reasonable number of years after first meeting the Authority’s legitimate, prudent, and verifiable costs.

SEC. 605. PRIVATIZATION STUDY.

(a) REQUIREMENT FOR PREPARATION OF STUDY- The Board of Directors of the Tennessee Valley Authority shall prepare a study for selling its electric power program (excluding dams and appurtenant works and structures) to private investors and, not later than two years after the date of enactment of this Act, shall submit such plan to the Congress.

(b) CONTENTS OF STUDY- The study shall consider the following--

(1) both the sale of the Authority’s electric power program as a whole and the sale of some or all of its component parts;

(2) alternative means of selling the Authority’s electric power program or its component parts, including a public stock offering, a private placement of stock, or the sale of assets; and

(3) the effect of any sale on--

(A) electric rates and competition in the regional electricity market,

(B) the operation of the Authority’s nonpower programs, and

(C) the repayment of the Authority’s debt.

(c) ADDITIONAL ELEMENTS- The study shall also include--

(1) An estimate of the amount of revenue that the United States Treasury would receive under each of the alternatives considered;

(2) the Board’s analysis of the feasibility of each of the alternatives considered and its recommendation either for retaining the Authority’s power program under federal ownership or the preferred alternative for selling it to private investors; and

(3) the Board’s recommendation of whether the Authority’s dams should--

(A) be transferred to the Department of the Army Corps of Engineers and responsibility for marketing electric energy produced by such dams assigned to the Southeastern Power Marketing Administration, or

(B) continue to be controlled by, and the electric energy they produce continue to be marketed by the Tennessee Valley Authority.

(d) FURTHER ACTION- The Board of Directors shall take not action to implement the sale of the Authority’s power program without further legislation authorizing such action.